HEA contests Chugach price increase

Rate negotiations between Chugach Electric Association and Homer Electric Association stepped up Tuesday when HEA began procedures to formally oppose a Chugach price increase of retail and wholesale electricity rates.

Homer Electric filed its testimony concerning the Chugach rate increase with the Regulatory Commission of Alaska, contesting a 6.64 percent increase Chugach proposed last July. The initial requested increase would result in the average HEA consumer using 750 kilowatt hours to pay an additional $18 a year.

In order for a utility to increase rates, it must apply for approval from the RCA.

Homer Electric spokesperson Joe Gallagher said the utility should actually be receiving a discount from Chugach.

"HEA's testimony questions several parts of the rate filing that Chugach filed in April 2002," Gallagher said. "An analysis by Homer Electric of Chugach's rate increase indicates that rather than the 6 percent increase, Chugach should be required to reduce the rates they charge to HEA by 2 percent."

Chugach, the largest electric utility in the state, would net about $6.7 million in additional revenue if RCA approves the price change, with more than $900,000 of that coming from HEA. This would be Chugach's first general rate case since the late 1980s.

"In order for Chugach to be whole and to cover our costs, we needed to increase our rates," said Carol Heyman, acting Chugach public relations manager.

The RCA approved a 1.614 interim refundable increase in September, then a 3.97 percent increase in November. An interim rate is one Chugach is allowed on a temporary basis. The amount is refundable if RCA decides that a lesser justifiable increase is allowed, then the excess would be refunded to HEA.

Gallagher said Chugach revised the magnitude of the increases in April, making the final permanent increase 7 percent. He said Chugach must respond to HEA's testimony before the RCA can move further with a ruling.

"The next step is for Chugach to ask HEA for information that supports our testimony as filed yesterday," Gallagher said Wednesday. "They will then file 'reply testimony' to our testimony."

A two-week hearing before the RCA is scheduled to begin the last week of November, with the decision on the merits of Chugach's requested increase to be released by the end of February 2003.